Nonprofit offers low-cost mortgages for modest income Baltimore residents, including those on rent subsidies

Many groups in Baltimore, including Bon Secours Community Works, offer counseling on housing issues. These residents — from left, Shermel Meadows, James Anderson and Chrystal Cooper — were faced with eviction before they attended an eviction prevention workshop by Bon Secours. (Amy Davis / Baltimore Sun)

Baltimore residents with modest incomes will have a chance this week to secure affordable mortgages from a national nonprofit that is also offering a radical alternative for tenants who rely on federal subsidies to pay rent — it will allow them to use their government vouchers to own, rather than lease, their homes.

The lending program aims to increase homeownership in city neighborhoods where soaring rents have left tens of thousands of low-and-moderate income tenants in a financial bind over how to afford to live in Baltimore without being one of the nearly 7,500 tenants who get evicted each year.

The Neighborhood Assistance Corporation of America — working with two major national banks and blessed by the federal government — is also pioneering a new effort to help residents with federal rental subsidies to morph those Housing Choice, or Section 8, vouchers into equity-building mortgage payments.

The charity, known as NACA, has already generated a buzz in the city: 2,000 people have pre-registered for the group’s event, which kicks off Thursday at 8 a.m. at the Radisson Hotel on Fayette Street and continues through Monday.

City Council President Bernard C. “Jack” Young said the effort could be life-changing for families being priced-out by high rents.

“It’s going to be something great. Specifically for those folks paying these high rents of $1,000 and $1,500,” Young said. “They could be using that money to be homeowners. They could have equity in their home and build wealth.”

The need for affordable rents and mortgages is dire in Baltimore, where less than half — 47 percent — of the housing is owned instead of rented. That’s far below Maryland’s 66.5 percent homeownership rate.

A recent Abell Foundation study found that more than half of Baltimore’s renters live in housing they cannot afford: “57 percent pay more than 30 percent of their income for housing and, staggeringly, 33 percent pay more than half,” states the report by Johns Hopkins University researcher Philip M.E. Garboden.

The U.S. Department of Housing and Urban Development is considering raising the amount that low-income families that receive housing subsidies are expected to pay for rent. The move would affect 4.7 million families relying on federal housing assistance — including 13,000 in Baltimore.

Baltimore is one stop on a multi-city “Achieve the Dream” tour that NACA is making with $13 billion in loan commitments from Bank of America and CitiMortgage. The nonprofit is coming to town with 150 staff to process mortgage applications, said Bruce Marks, who runs the Boston-based, 30-year-old NACA. People with low-to-moderate incomes are encouraged to attend, though the group does not impose specific income guidelines.

Repair and renovation costs can be built into the loans for single-family homes, condos and multi-family houses, Marks said. The group is also authorized to help existing homeowners modify unaffordable mortgages. And, for the first time, NACA will allow tenants to direct their government rental subsidies toward mortgages designed to be paid off within 10 to 15 years.

Qualified clients will leave with pre-approved loans being offered at around 4.375 percent for 15-year and 30-year fixed rates. Those who do not qualify will receive counseling.

“It is an unprecedented opportunity for people who have been locked out of homeownership to become a homeowner with the best mortgage terms in America,” Marks said.

To those who think the loans sound too good to be true, Marks said the nonprofit has approved some 60,000 mortgages and is a HUD -approved housing counselor.

Marks said 80 percent of people who receive NACA pre-approvals successfully close on their loans.

Ashaan Scott and his wife, Kameke, are among those who succeeded.

In 2015, the Baltimore couple was paying $650 to rent a one-bedroom, basement apartment in Pigtown. It quickly became too cramped for them and their three children — ages 17 months, 7 years and 14 years.

An aunt in Prince George’s County who alerted Scott that his wife had been complaining about the apartment alerted him to NACA’s programs.

After applying for a loan, the couple bought a $71,000 three-bedroom rowhouse in East Baltimore’s Berea neighborhood, across the street from a new public school that their 7-year-old daughter attends and loves. Their $71,000 mortgage carries a 2.7 percent interest rate and costs them about $531 a month.

“It feels awesome” to be a homeowner, said Scott, 37, who runs his own home improvement business.

Baltimore housing advocates are happy to see more lending in the city. But some were concerned whether NACA had the capacity to provide enough follow-up and support to the hundreds of people expected to seek the loans.

Neighborhood Housing Services and St. Ambrose are among many programs in Baltimore that help low-income families become homeowners.

Dan Ellis, director of Neighborhood Housing Services, said the NACA opportunity is exciting, but he hopes the people who apply are not disappointed.

“It’s difficult to provide that type of assistance on the scale that is being proposed,” Ellis said. “It’s hard to really do this work. It takes a lot of time.”

David Sann, housing development director at St. Ambrose Housing Aid Center, agreed. NACA’s loans are based on an old-time lending practice called “character loans” that draw on a borrower’s reputation and payment history, rather than a computer algorithm, Sann said.

“To a great degree, that is gone in the market place and there is an immense need for that,” Sann said. “If they could bring that back meaningfully, then I think that’s great.”

NACA’s employees will need to be prepared to provide intense, one-on-one counseling with clients who are “going to need a lot of hand-holding, an extra level of counseling,” he said.

Alice Kennedy, a deputy commissioner for the Baltimore Housing department, said making homeownership accessible to more people is a priority for Mayor Catherine Pugh. The city is not a sponsor of the NACA event, but officials helped promote it.

“Homeownership is an important part of community development, stabilization, revitalization and neighborhood cohesion,” Kennedy said.

Annie Milli, director of Live Baltimore, a nonprofit that promotes homeownership in the city, said residents need to know they may not be eligible for cash incentives from the city and state — including the Vacants to Value or Live Near Your Work programs — if they get a loan from NACA, which is not a city-approved homeownership counseling agency.

Still, Milli added, the program could be “a good fit for buyers.”

Council President Young credits NACA for providing “out of the box” solutions for people who have been ignored or discriminated against by the market in the past.

Marks said past “racist government and lending processes” helped lead to the development of “white suburbs” and locked African-Americans and other minorities out of homeownership for generations. The nonprofit’s products could help to reverse those harms and help to revitalize Baltimore, he said.

“We have a track record of getting results,” Marks said, adding that NACA’s foreclosure rate is below 1 percent. “People have everything to gain and nothing to lose.”